Greece approaches World Bank for cash

Greece’s €86 billion bailout package could soon become even more complicated, after the country’s government decided to seek “financial assistance” from the World Bank.

A Greek government spokesperson confirmed to POLITICO on Friday that Athens has expressed interest in “receiving a loan of €3 billion for financing active employment policies and programs.”

If accepted, the Greek request would push the country further into debt at a time when the government continues to battle over the terms and conditions of its latest bailout package. Negotiations resumed this week in Athens between the government and its eurozone creditors, the European Commission, International Monetary Fund, and European Stability Mechanism.

A long-running disagreement between the Europeans and the IMF on debt relief and austerity have raised the possibility that the Washington-based financial organization may walk away from the current bailout program. But multiple sources have dismissed any notion that the World Bank could replace the IMF — a key player in the Greek debt crisis since 2010.

A failure to complete the so-called “second review” of the existing package could prompt European creditors to withhold additional rescue funds from the Greek government, which faces major debt repayment deadlines in the coming months. A Greek default in turn could reignite the debate about whether the country should be kicked out of the eurozone.

The Greek overtures to the World Bank caught officials in Brussels and Berlin by surprise, while leaving analysts scratching their heads over the country’s decision.

Greece’s current creditors “are not too happy about” the fresh request for funds, an EU official said Thursday. In Germany — Greece’s biggest creditor — the news of Greece’s loan request could become “an issue” in the ongoing bailout negotiations, though “we’ll have to wait and see,” a Bundestag source said.

Nonetheless, Greece’s heavily indebted government has decided to ask for more loans, this time from the World Bank, another Washington-based organization which specializes in providing funds to impoverished countries and emerging economies.

“The government of Greece has asked the World Bank to provide technical and financial assistance to address pressing challenges including: long-term unemployment, economic competitiveness and growth and social protection,” a spokesperson from the World Bank said. “In accordance with World Bank procedures, any final decision on providing loans would be subject to approval by the bank’s board of executive directors.”

The World Bank declined to confirm how much money Greece requested.

Regardless of the eventual outcome, some analysts believe Greece’s decision may ultimately come back to haunt the country.

“If Greece is indeed considering to apply for a World Bank loan, it would primarily be a sign of desperation,” said Claus Vistesen, Pantheon Macroeconomics’ chief eurozone economist. “There is the rather embarrassing stigma of going to the World Bank as a notional ‘developed’ economy. I am not sure that it would help Greece to gain market access with its bonds any more quickly.”

This item has been updated to include comment from Greece and the amount of its loan request.

Drakes drum

This is the biggest story about Europe in the last five years, how the eu had beggared a sovereign country so parents cannot afford to feed their children, couples have to live with parents, while eu officials write grand statements. Nothing will change while the eu still exists. Spain and Italy next…. junker and co should hang themselves in shame

Posted on 3/2/17 | 7:41 PM CEST

Ronald Grünebaum

@ Drakes drum

Of course, you are entitled to see things this way but it remains rubbish.

The Eurozone made sure that Greece does not go bankrupt. Greece had become unable to borrow in the markets and without EZ support the Greek government would have been unable to pay salaries and pensions. The debts were piled up by various Greek governments, for example also for pompous Olympic Games, and nobody forced Greece to behave totally irresponsibly.

These are the facts.

Posted on 3/2/17 | 7:46 PM CEST

Filippo

@ronald
Once and for all: without the EZ support, Greece would have defaulted in 2010 for a much lower amount than today, on bonds mostly owned by french and german banks. Greece would have restarted immediately without the burden of interests and the french and german banking system would have faced further bankruptcy.
Stop with blatant lies

Posted on 3/2/17 | 8:01 PM CEST

Filippo

This is the first wise move Tsipras does since when he dropped the results of the referendum. European lenders are only interested in spoiling his country and punishing with retaliations for domestic reasons

Posted on 3/2/17 | 8:04 PM CEST

Alberto

I grew up as profundly pro-EU (and still mostly am). But coming from a social democrat/keynesian background, and from a mediterranean country…
I can only say the way the EU has dealt with Greece is utterly revolting.

Posted on 3/2/17 | 8:10 PM CEST

Corni

You simply cannot reward irresponsible behavior, so why not let the proud Greek people taking their fate in their own hands, rather than begging endlessly.

Posted on 3/2/17 | 8:39 PM CEST

alan

There are elements of truth in all of the comments above.

The one inescapable fact now is that most of Greece’s debt is now held by public bodies whether they are the IMF or EU. The default risk is now with the taxpayer & when this all goes pear shaped- as it seems to be- the political reaction will be mighty!

Posted on 3/2/17 | 8:46 PM CEST

Filippo

@alan
Frankly, we don’t give a damn about our money lent to greece. We used to export 9 bn euro yearly in greece, now it’s less than 4. All this, only to have back some 40 bns, when? In 2045? How much devalued? And until then keep losing 5 bns exports any year because they cannot buy anything anymore? Only a pear shaped head in brussels or berlin could conceive such a strategy. Being greedy is bad but somehow excusable. Being stupid it’s not. The sooner we drop the debt, the better for them and for us

Posted on 3/2/17 | 9:13 PM CEST

alan

@Filippo

My only issue with your comments is that any “loans” currently in place are in reality fiscal transfers & will/can never be repaid as it is

Posted on 3/2/17 | 9:48 PM CEST

Filippo

@alan
It would be certainly better if they really were transfers. But they will never accept to state it formally. Not because someone is really believing he will have his money back, but simply because they couldn’t ask conditions anymore. After all, conditions, namely the disgusting “memorandum”, are the real goal of all this shame. E.G.: they forced Greece to extend to nine days the expiration time of fresh milk…which chapter of the fiscal policy university book explains that drinking rotten milk helps controlling the public debt?

Posted on 3/2/17 | 10:42 PM CEST

Liz

@Ronald Grünebaum

Well done Ron. Now if only Greece weren’t on their arse and in nearly 100bn of debt it would have made sense. Try again.

Posted on 3/2/17 | 11:50 PM CEST

steve

Greece wants debt reduction now so they can go back and “borrow” more money from the euro markets which have been setup specifically so that basket cases like Greece and Italy can continue to sell debt. If Greece is going to default then they will need to start borrowing in drachmas, which should have been the case anyways because it limits their ambitions. Either way they want to play it, there’s not going to be any more free borrowings for Greece so they may as well suck it up and make the structural changes they have needed all along.

Posted on 3/3/17 | 4:39 AM CEST

Gareth Cook

Well one thing Greece is emerging market and also it shows what a joke EZ is in trying to control Greece oh yes more can kicking on the way EU/EZ style

Posted on 3/3/17 | 9:38 AM CEST

Ronald Grünebaum

@Filippo

Oh, I see. Greece would have defaulted and my statement that there would have been no money for salaries and pensions is true. How Greece would have restarted without any access to the financial markets remains your secret. I guess they would have printed some useless vouchers and headed at hyperinflation straightaway. All so much better than what they have now.

Anyway, the current debts burden is not correctly calculated. Greece does only start repayment in 2022 and will finish this by 2050. Inflation will reduce these debts significantly.

And you seem to ignore that Italian banks had lots of loans to Greece. Italy would have been in deep trouble, much more than France or Germany.

Posted on 3/3/17 | 11:03 AM CEST

Alberto

@Ronald
It would never have been easy for sure, but I guess in the end it comes down to prefering to blled slowly with no freedom (what is being done) or try to have a shot with some more dignity.
Let me tell you something, the proud German people would have not stayed with the first option for 7 years

Posted on 3/3/17 | 11:35 AM CEST

Alberto

*bleed

Posted on 3/3/17 | 11:36 AM CEST

Denis Cooper

Greece should never have been allowed to join the euro and to make the best of a bad job it should leave the euro and revert to its own national currency under its own control. However for geopolitical reasons that will not be allowed to happen while there is any conceivable alternative.

Posted on 3/3/17 | 12:16 PM CEST

Filippo

@ronald
In 2010 european banks held 134 bns greek debt: french 52, germans 32, italians 4,7.
We paid for nearly 1.000% the debt we held, regardless what the embedded german media say.
Greece’s primary deficit in 2010 was around 5,% which means that with austerity measures hugely lower than those that came next they could have reached a balanced budget and not need anymore to borrow money. The rest, a 6% gdp interest expenditure could come by defaulting, so letting many french and german banks, and very few italians, go bankrupt. Which is exactly what a lender that can’t do his job to select credit deserves. And which is what you keep asking loud for anyone on earth but yourselves

Posted on 3/3/17 | 12:47 PM CEST

Panos

@ Drakes drum
Although I’m Greek, I disagree with you. Greece is in its current position due to the mis-management of public finances and lack of deep rooted institutions over the last decades (if not centuries). Debt relief? Yes, because obviously Greece can’t pay in real terms anyway, but only if Greece shows clear signals it embraces the changes and reforms it needs to make to its economy and to many outdated laws.

Many decades of mismanagement means such process is lengthy and with no guarantee success. The Greek political system should die and a new needs to emerge with a different mindset. This takes years, and indeed it is happening, behind the scenes the new is emerging, the birth is difficult and painful. Young people are forced to think and act different vs their parents’ generation due to the situation. EU needs to stand still, not to listen to the Greek political establishment who seeks the easy way, borrow and pay their cronies. Instead to push for reforms.

Greece has two options either to reform its economy or leave the Eurozone. The second option will be a disaster for a country without the management in place to adapt easy. There is only one option, the reforms which will surely continue to kill the political establishment.

Posted on 3/3/17 | 2:11 PM CEST

Alberto

@Panos
And they will also continue to kill (what’s left of) your economy in the meanwhile… The policies of the troika are not really the “reforms” you justly demand for your political system

Posted on 3/3/17 | 2:49 PM CEST

cos

Panos ……The Greek political system should die……. they wont die the easy way
without a “minor revolution -yesterday- to dispose the old cheaters crooks and
corrupted politicians including their family cronies” there is no chance for Greece .
And out of Euro now for whatever it takes.
better 1/2 yrs suffering instead of 50 yrs bleeding.

Posted on 3/3/17 | 5:50 PM CEST

Peter Pan

Many comments seem fairly one-sided. While it is true that Greece would be better off outside the Euro right now, let us not forget that it was Greece who cheated their way into the Euro club by falsifying statistics in the first place. Also, I do not understand what benefit countries like Germany (who is usually the main scapegoat for Greek corruption and mismanagement) would reap by crippling Greece and plunging the Euro into an international crisis. After all we are all in the same European boat. This perspective of blaming one European country for another’s decades-old problems seems very naive and the limited view of European naval-gazing disregards the fact that it is not other European nations who are the “enemy” here but the real threats that we, as a European community with European values and social achievements are facing is from the outside as they are the real benefactors of all the European infighting.

Posted on 3/6/17 | 10:59 PM CEST

Elios

Greece is kaput! GREXIT will be a reality very soon. Others will follow.